How To Assess If An Investment Is Right For You?
You invest in real estate to earn a return. That’s THE reason to invest. If you don’t expect a return, it’s not an investment and you should seriously consider putting your money elsewhere. (Note: there are some exceptions to this rule – such as if you might get some other kind of non-financial return).
When assessing the kind of financial returns you should expect, there are basically two types of returns you can make on any investment:
- Appreciation, which is the rise in value between the price you bought the investment for and the price you sold the investment for.
- Cash flow (or income), which is the money earned on a regular basis from your invest over a period of time.
Rental Property Model Return
To illustrate, consider what how you’d make money from owning a rental property: You’d earn the appreciation when you sell the property as the difference between your purchase price and your selling price, and you’d earn cash flow from rental income while you owned the property.
Although both types of income can tie up your capital, cash flow trickles a return back to you over time while appreciation gives you one big hit of return all at once. And usually (although not always) cash flow tends to be predictable, while appreciation isn’t always as predictable.
OTHER MODELS OF INVESTING
There are other models of investing that are different, or are hybrid versions of what I’ve written above. For example:
- Wholesaling can give you a small hit of income all at once (it’s a fee for selling a contract). It’s predictable, like cash flow but it’s a one-time-only payment, like appreciation.
- Rent-To-Own can give you a bit of both as well – cash flow while your tenants are renting, and then appreciation when they buy.
- Building a team can help you replicate your processes and turn just about any type of investing into cash flow investing if you build systems (this is what I do with wholesaling).
WHICH TYPE OF RETURN IS BEST FOR YOU?
I can’t prescribe the best kind of return that is right for you – it’s really based on your lifestyle and financial goals. Start by figuring out when you need your return: Do you need a great big hit of income all at once in the future? Or, do you need a steady and predictable return? What does your lifestyle allow and how do your financial goals guide you?
|Kent Clothier experienced the trials and tribulations of building businesses across several industries has taught Kent the value of having the right mindset and principles in place to achieve your ultimate success.|
Kent Clothier achieved corporate success at an early age, rising up the corporate ladder of one of the largest grocery distribution companies in the country. In 1987 Kent began helping his father run a trading company in the grocery distribution and supply industry. By the age of 23 Kent took over the day to day sales and operations of the company and in turn, the company grew to annual sales of over $80 million. Kent ultimately oversaw the sale of the company to a Boca Raton based competitor and quickly rose through the ranks of the larger organization. By 2000, Kent was the Executive Director of Sales and Market for the organization, now doing in excess of $2 billion in annual sales and a company that had grown into the 7th largest privately held company in Florida.
Although he had owned a few rental properties for several years, in 2000 Kent started his new venture with very little previous real estate experience. Like many others, Kent was overwhelmed with the lack of quality information in the market to help a real estate professional to grow their business. With so much garbage material in the industry, Kent found it difficult to navigate between fact and fiction. He decided that the only way to distinguish between the two was to get involved and to learn some things along the way.
Kent started his real estate career by looking to wholesale a few houses each month to create a nice living. However, this soon evolved into a much larger real estate organization. Kent and his family now run a company that has quickly evolved into a team that has become one of the premiere real estate investment organizations in the country.
By daring to dream big, taking calculated risks, and a willingness to step out, Kent, his family, and their partners have built an organization that stands out in real estate today:
Wholesaling over 500 houses since 2003, 200 in 2008, and current plans for over 350 in 2009
Through this company, now operates one of the largest property management companies in Tennessee with over 700 properties under management
President and CEO , 1-800-SELL-NOW
Their family now owns over 150 rental properties
Their family now owns 7 commercial buildings in Memphis, Tennessee
Owns and overseeing 24 unit condo conversion in Memphis, Tennessee
Founding member of Mid-South REIA with over 350 members
Kent Clothier, along the way, perfected marketing techniques and strategies using 1-800-SELL-NOW that helped to drive truly motivated sellers to the organization and was the single biggest reason for his real estate success.
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